Do New Socialists Really Want Socialism?

Do New Socialists Really Want Socialism?

By Rick Kahler CFP®

Increasingly in the US, it’s becoming more socially acceptable—perhaps even fashionable—to be anti-wealth and anti-capitalism.

Even identifying as a socialist is no longer the dominion of the far left but is gaining popularity. A number of mainstream politicians, including Presidential candidates, are self-identifying as “socialist.” According to a February 19 article by Mike Allen in Google’s Axios, polling shows younger Americans are souring on capitalism and don’t find the label “socialist” scary or demeaning.

Interestingly, the meanings I see thrown about for socialism and capitalism rarely agree with the traditional definitions.

For example, some self-proclaimed socialists call for higher taxes on the rich, more funding for massive infrastructure improvements, and expanding social welfare programs with proposals like “Medicare for all.” These are not necessarily socialism, but rather an expansion of social programs. There is a difference.

Socialism is an economic system in which the means of production and distribution of goods are owned and controlled collectively or by the government. It is characterized by production for use rather than profit, equality of individual wealth and incomes, the absence of competitive economic activity, and government determination of investment, prices, and production levels.

A truly socialistic economy has no privately owned business. Since all business are government-owned, there is no competitive force serving to improve services or drive down prices. Prices are not set competitively but by government policy. Everyone is economically equal, with no rich or poor. At least in theory.

Embracing increased taxes on fossil fuels and more government spending for health care or green initiatives is not inherently a call for a socialistic economy. It is a call for bigger government and placing more restrictions on free enterprise, which is only a step toward socialism.

For example, the Scandinavian countries have massive social programs. Yet they are not socialistic economies. Their systems allow for free markets and the private ownership of business, meaning their social programs are funded by capitalism and free enterprise.

We have yet to see a society that has successfully tried real socialism. Countries that have attempted it, according to Forbes, are China, Cambodia, Cuba, East Germany, Ethiopia, North Korea, Poland, Romania, the USSR, and Venezuela. Even though many of them have abandoned socialism, the effects are long lasting. Of these countries, according to the Economist, in 2016 Poland had the highest standard of living, ranking at 68 worldwide.

Israeli David Rubin, author of the Trump and the Jews, says in a February Yonkers Tribune article, “I must warn my many American friends to learn some critical lessons from Israel’s socialist past.” He points out that Israel’s founders created a socialist-based economy intended to provide financial security for its new citizens, including millions of refugees. The country struggled with economic stagnation, soaring inflation, low wages, and high prices. In the 1980’s Israel began a shift to free market capitalism, and today its economy is thriving.

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An idea strongly identified with today’s self-identified socialists in the US is the “Green New Deal” resolution which failed to pass in the Senate. In addition to proposals to aggressively reduce greenhouse gas emissions and require the use of renewable energy, it also calls for “guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States.”

Assessment

Imposing stringent regulations on property owners and businesses isn’t inherently socialistic, although it would raise prices for everyone, especially the low-income Americans the proposal intends to protect.

However, guaranteeing a lifelong sustainable income for every person in the US, and placing health care under the dominion of the government, does take a giant step toward socialism.

Your thoughts are appreciated

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One Response

  1. Is capitalism broken?

    Increasing numbers of Americans, particularly younger adults, seem to think so. This idea is part of the motivation for those who, as discussed in last week’s column, are turning toward socialism. An Axios poll in January found 70% of voters want the economic system reformed. They think the economic system is skewed toward the wealthy and the government should do more to fix it—and they’re ready to vote for a 2020 candidate who agrees.

    Many who claim that capitalism no longer works may not understand what capitalism actually is. In reading reams of articles criticizing capitalism, it seems to me those critical of the system believe that capitalism inherently embraces greed, corruption, oppression,and dishonesty. They appear at times to use the term as a disapproving synonym for “the wealthy” or “big corporations.”

    More accurately, capitalism is an economic system based on the private ownership of the means of production, distribution, and exchange. It is characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions.It is also called free enterprise or private enterprise.

    Who are capitalists?

    The wealthy owner of a large, successful business is a capitalist. So is a self-employed person who cleans houses for a living. A freelance artist offering works for sale but finding few buyers is a capitalist. So is a teenager earningmoney during the summer by mowing neighbors’ lawns. No matter their level of financial success, they are all operating competitive, free enterprise businesses.

    Greed and corruption are not tied to particular economic models, but are aspects of human nature that have been with us for millennia. Yes, some business owners and wealthy people are greedy and selfish. So are some hourly-wage workers and poor people. Thesetraits—just like generosity and altruism—are found in all parts of society. They appear in both the blue-collar worker who lies to a huge insurance company to obtain fraudulent benefits and the corporate CEO who doubles the price of life-saving medical products.

    What capitalism provides, in a way other economic systems do not, is a method of distributing limited resources as efficiently as possible, as the dynamics of the free market and competition drive down prices and improve quality. Systems controlled by centralplanning have a track record of producing the opposite: economies where shortages prevail and those in charge prosper on the backs of the masses. Capitalism offers more opportunities than other economic systems to lift people out of poverty.

    A true competitive marketplace results in improved goods and services and lower prices. Socialism results in no incentives to improve goods or services, and controlled pricing results in shortages.

    Of course, as Investopedia points out, “Freemarket economies and command economies [such as socialism] exist more as abstract concepts than as tangible realities; almost all of the world’s economies feature elements of both systems.”

    In practice, this means that capitalistic countries operate with a level of government regulations such as pure food and drug laws and minimum wages.. If capitalism isn’t working, it’s often a result of government trying to over-control the production of goodsand services through increased regulations. This takes away one of the necessary components of capitalism, which is freedom and competition. Increasing government control is one way that monopolies and oligopolies arise, which inherently stifle competitionand give rise to corruption. Certainly, corruption does exist in pockets in capitalistic economies. Yet it is a mainstay of socialism.

    In order to flourish, capitalism requires freedom. As capitalists who have achieved long-term success can tell you, a thriving capitalist system also requires virtue and integrity.

    Rick Kahler CFP®

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